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April 23, 2017

Data on life in East Germany (DDR 1949 to 1990) compared to West Germany (BRD)

East Germany Page

One of the most common arguments against socialism I hear is when people compare and contrast East and West Germany. They’ll usually point to the West and say “look how great the economy is with capitalism” then point to the East and say “look how awful things are with socialism.” Doing a side by side comparison of the East and West Germany out of historical context however, is very misleading, so let’s dive into the real story behind the GDR.

The first thing you’ll hear people claim is how much better the West was than the East, so let’s explore this notion a little further. Let’s start by taking a look at the GDR’s real income. Real income per capita in the GDR was already trailing the West before its establishment, mostly because of reparation payments it had to make shortly after World War II, and, despite faster real economic growth in East Germany (as well as most of Eastern Europe compared to the West) [26]:

it had not yet caught up with West Germany’s levels by 1989. In particular, in the 15 years after World War II the Soviet Union extracted 50 billion more Marks in reparations from East Germany than West Germany [1]. Even more recent figures put that estimate at over 100 billion Marks [2] which was several times larger than the GDR’s own national output at the time. So you really cannot expect the GDR to be doing as well as the West in that regard given their circumstance. Yes it is true that West Germany also made postwar payments related to Nazi Germany’s atrocities and war defeat (including compensation to war victims), however these were largely offset by Marshall Plan aid given to West Germany by the USA shortly after World War II [1]. Just think, if East Germany had instead been able to invest the 100 billion Marks they were forced to pay in reparations (starting in 1953 and reinvesting all capital and earnings each year) at its average 18% rate of return on investments [3], it would have compounded to give East Germans an income per capita equal to about 15 times the level of West Germany’s in 1989. (We can arrive at this by assuming that an average payment of 2 billion Marks per year, beginning in 1953, were invested at 18% instead of paid out for war related crimes and debts, and assuming the earnings (based on the same 18% interest rate) from the capital accumulated after 36 years were paid out in 1989 (and each year after that), West German income per capita would have been only about 1/3 higher. Comparing this figure to the per capita East German figures estimated to have existed without reparations indicates East German per capita income in 1989 to still have been far higher at 5-10 times that of West German per capita income). Instead, however, the enormous reparations caused East German income per capita to be only about 2/5 that of West Germany in the 1950s [2], although it had risen to 2/3 of the West German level by 1989 [4]. It was the discrepancy in income per capita arising from differences in reparations that had caused East Germany to build the Berlin Wall in 1961; in order to prevent its skilled workers (such as essential doctors and nurses) from being “bought” by West Germany which would offer much higher wages. In fact, before the Berlin Wall was erected, several million East Germans (especially skilled workers like doctors and engineers) moved to West Germany for the higher incomes available there, and this migration resulted in a large loss to the East German economy [1]. Besides the large net migrations of people, black market activities and outright sabotage by both the CIA and West Germany also helped motivate the building of the Wall [5]. Given that East German income would have been higher than in West Germany without the reparations payments, one can clearly see that it would not have been necessary for East Germany to have the Berlin Wall built, if only the West had made its fair share of the reparation payments for Nazi Germany’s war crimes. Had the West paid as much as the East, the burden to East Germany would have been enormously reduced and would have allowed its income to be substantially higher. At the same time, West Germany’s income would have been reduced by it making its share of the payments. In this situation, East Germany would not have had to have longer work weeks (since it would not have been necessary to catch up with the West), nor to have such severe shortages (that could have been alleviated with greater wealth), nor to spend so little on pollution control (that reflected East Germany’s relative poverty), nor to restrict political freedoms (that East Germany did not want the richer West Germany to take advantage of), nor to have such an obnoxious secret police (whose primary purpose was to keep East Germans from leaving the country for the greater riches of West Germany). Almost all accusations about how repressive and terrible East Germany was can be traced back to how the country was treated postwar.

Let’s continue by taking a look at how the GDR actually functioned, while also keeping in mind what I discussed in the last paragraph about how worse off the GDR was postwar compared to the West. The first benefit the GDR offered to its citizens was a right to work. The right to work at a job of one’s own choice was guaranteed by the East German constitution [6]. While there were some people (mostly alcoholics and drug addicts) who continuously refused to show up for jobs offered by the state, their numbers represented only about 0.2% of the entire East German work force, and only 0.1% of the scheduled work hours for the rest of the labor force was lost due to unexcused absences [7]. These findings are especially important in regard to the whole incentive argument, given that people were (for the most part) protected from being fired/penalized for failing to show up for work or for not working productively [8). This basic right to work was so enjoyed by the people of the GDR that a 1999 survey of eastern Germans indicated about 70% of them felt they had much more job security and much more satisfactory work in East Germany, than in the old capitalist Germany [9]. Another thing the GDR handled much better than the West was inflation. While there was a slight average annual inflation rate of 0.5% in the aggregate economy between 1960 and 1989, prices for consumer goods were held constant over the 1960 – 1989 interval [10]. Even the inflation rate in the aggregate economy was 0% in East Germany’s final decade, as admitted by the final East German statistics [10]. While West German propagandists like Schwarzer 1999 admit that East German aggregate accounts were just as accurate as West German ones, they often try to fabricate inflation in East Germany by citing the depreciation of the East German currency in the 1980s on the black markets (or in the context of a very narrowly traded basked of goods). Basing an aggregate inflation rate on such prices of a limited amount of goods in a very narrow market is not only absurd and obviously an attempt at slander, it is also totally inconsistent with data on East German aggregate purchasing power, as reported by the West German government and various West German banks [11], which further prove the East German inflation figures to be accurate and not fabricated. Another thing the GDR offered its citizens was a right to higher education. In the GDR there was no tuition for college, and a living allowance was provided by the state to students without any future debt obligations [12].In fact, the educational system in the GDR worked so well that only a small minority of East Germans feel that the educational system is better today in unified Germany, whereas far more eastern Germans (more than double) believe the educational system under socialism was superior [9]. In East Germany, crime rates were also much lower in comparison to the West which may have had something to do with the fact that illegal drugs were almost nonexistent in the GDR [13] but regardless, murder and violence were very rare, and theft was much less prevalent than in most capitalist countries [14]. This is even more of a great achievement when taking into consideration the GDR’s socioeconomic conditions at the time. For example, in 1988, there were 7 criminal acts per thousand residents in East Germany compared to 71 per thousand residents in West Germany [15]. As a result, a 1999 survey of eastern Germans indicated that 81% felt less secure from crime in the unified capitalist Germany than in communist East Germany [9]. Even American women visiting East Germany in the 1980s were astounded that they could actually walk the streets alone at night without any fear. The GDR also offered many more rights to women and children. Women had initial access to jobs at least as good as those of men in East Germany, although family considerations and other factors may have resulted in them not advancing as far as males later on in life [32]. Regardless, female employees were about 3 times more likely to hold steady jobs in East Germany than working women in West Germany [33]. A paid maternity leave of 6 months was also available after the birth of the first child, and up to one year for the second child [34]. The maternity leave increased to 18 months for the third and all subsequent children. The last thing I’ll mention is the fact that the tax rate in the GDR was much more fair as well as much simpler than in the West. The state withheld about 15% from wages (up to a maximum of 25% for higher wage-earners) without the need for filing a tax form [35]. On the other hand, for private companies, which could exist with 10 or fewer employees, taxes on profits were levied at a steeply progressive rate that reached 90% for income over 250,000 Marks [35], which was about $150,000 at official exchange rates. These are just some of the many things that the GDR did that made them a preferable country to live in when accounting for their conditions.

A claim often given by rightists and just people who believe in western propaganda in general is that there was no political freedom in East Germany, or at least that there wasn’t nearly as much of it as there was in the West. However, this claim is contradicted by reality when one does some basic research into the matter. The West German system created the illusion of liberal democracy by publicly allowing the formation of different political parties. At first sight, this appeared to compare favorably with East Germany, where one needed to obtain permission from the government to start a new political party. However, the West German government can and has outlawed many peaceful political parties and organizations that are not perceived to be consistent with the capitalist order, such as numerous pacifist groups and a fairly popular West German communist party in the 1950s [17]. Thus, despite the illusion of greater political freedom in West Germany, there is very little difference in practice between East Germany’s requirement to obtain permission to form a political party and West Germany’s right to disallow any political parties or organizations it chooses, that and the West German system creates more risks to founder activists with respect to expending the time and money in starting up an organization that is only later ruled to be forbidden. An example of West Germany forcing conformity in politics can be seen when the former communist party of East Germany (relabeled the Party of Democratic Socialism from the Socialist Unity Party), in anticipation of reunification revised its platform to meet the constitutional requirements of the united Germany that were the same as in West Germany [18]. West Germany also appeared freer with respect to making or writing statements about the government, but there were laws in West Germany that prohibit slandering government rulers, just as such laws existed in East Germany but were rarely enforced. In addition, although demonstrations are widely thought of as being tolerated in West Germany, there is substantial evidence of police and social repression of demonstrations in West Germany [19]. On the other hand, the massive peaceful demonstrations in East Germany in the fall of 1 989 indicate substantially less repression there than is normally assumed, and dissent on particular issues was freely allowed in East Germany insofar as petitions could be (and often were) collected and sent to the East German government for action [20]. In fact, . the rights of citizens to protest against government policies and against government bureaucrats or politicians was fairly widespread in not only the GDR, but all of Eastern Europe and the socialist systems not only allowed such protests but actually encourage them to reduce the occurrence of “departures from legality,” “arbitrary acts,” and “abuse of power by agencies of public administration” [21]. It should also be understood that in capitalist West Germany, only the rich had sufficient money to make their statements or writings sufficiently publicized to have a widespread effect on the opinions of others, and it has been well-established that West German elections are controlled by marketing, money, and personalities, as they always are under capitalist systems [22]. Another way the West repressed political opposition was by making sure that communists were legally not allowed to have jobs in the West German government bureaucracy [18], and West German businesses (being invariably owned by rich anticommunists) often follow the government’s example, thereby virtually prohibiting working people from publicly stating communist opinions in capitalist West Germany. A more general form of extortion also existed (and still somewhat exists) insofar as rich capitalists often threatened to eliminate jobs (by taking capital out of the country) if a socialist government was elected, and this threat of unemployment was, and still is made very clear to the working masses in capitalist societies [23]. Despite these facts, and despite the fact that the established, ruling West German political parties are widely perceived to be “clubs for a political class that makes its own rules” [24], West German elections are still generally considered to be more democratic than East German ones in the mainstream history books. Regardless, it should be known that East Germany also had many political parties, however they voluntarily formed into the United National Front shortly after World War II to create a coalition bloc designed to prevent a reelection of the capitalist Nazis [25]. East Germany also permitted voters to cast secret ballets and always had more then one candidate for each government position [27]. Although election results typically resulted in over 90% of all votes being for candidates or parties that did not favor revolutionary changes in the East German system (just as West German elections results generally resulted in over 90% of the people voting for nonrevolutionary West German capitalist parties) it was always possible to change the East German system from within the established political parties (including the communist party), as those parties were open to all and encouraged participation in the political process [28]. The East German political system was actually more democratic than the West German one in at least two respects. In particular, only East Germany allowed voters to cast votes against the system, and thousands did so at each election [25].

Now, let’s take another brief look at the economic situations of both East and West Germany. In the first paragraph I touched a little on this in my explanation of why the West was so much better off after WWII which lead to it becoming much richer than the East, but I’d like to expand on this a bit more. The most important tool used by the United States in the Cold War was to help its allies grow and prosper economically. By making West Germany richer than East Germany, the USA was able to support its position that capitalism was better than socialism. Financial aid and capital from the USA was especially important in the economic reconstruction of West Germany in the years following WWII [1]. On the other hand, the much poorer Soviet Union did not have sufficient wealth to offer to East Germany. Instead, with their own country wrecked by WWII, the Soviets required the East Germans to make enormous reparation payments as compensation for all the damage and killing that the unified Germany had committed. Even aside from the differences in damage inflicted by WWII on the Soviet Union and the USA (that being that the Soviets took much heavier losses to both soldiers and infrastructure), the Soviets had inherited a terribly poor country in 1917 when they first took power from the previous feudal leaders of Russia (with national income per capita equal to 1/2 that of the USA at that time), and they never could have offered the assistance that the USA provided to the West Germans. As a result of the difference in economic standpoints of both the USA and USSR, as well as the postwar foreign economic assistance/reparations (as documented more in depth in the first paragraph), West Germany very quickly became the much wealthier country [1]. This situation provided West Germany with an excellent economic weapon which they used to strike at East Germany. In particular, the West German government provided working age East Germans who moved to West Germany with significant amounts of money and other benefits in order to emigrate to West Germany. For instance, free loans and other state assistance of up to 1 60,000 West German Marks (about $100,000) were offered to each East German emigrant worker, along with a scarce apartment and reimbursement for any property that remained behind in East Germany [29]. With all of this in mind, it makes sense why East Germany was losing skilled workers which not only hurt their economy, but also forced them to build the Berlin Wall as I described in the first paragraph. Moreover, it should be noted that East Germany’s national income grew in real terms about 2% faster annually than the West German economy between 1961 and 1989. In fact, the real growth rates in per capita income in East Germany reported by the Statistisches Amt [30] were higher in every decade from 1950 to 1989 than those reported for West Germany by the Statistisches Bundesamt. However, because the very large reparation payments made by East Germany to the Soviet Union after World War II had caused it to start at a much lower level, it had not yet caught up by the 1980s, being only about 2/3 that of West Germany’s at that time [4]. Another point about the East German economy is that ratio of national income to capital stack rose from 7.2% in 1950 to 15.7% in 1989 despite an overall 10% drop in its population over that time period [30] and despite the fact that the East German capital stock started out at a low level because of capital seizures by the Soviet Union after WWII [31]. This massive disparity in both the country’s history/foundation clearly explain why the West always appeared to be doing better, economically, than the East; they simply had more financial support and were treated much better during the postwar era.

Finally, I’ll end this essay by discussing the exact reason for why the GDR collapsed. Like the Berlin Wall, the cause of the collapse of East Germany can be traced to the income disparities in the two countries [36]. As described in previous paragraphs, the income disparities between the two countries were caused almost wholly by how they were treated postwar. That being that the West didn’t have to pay nearly as much in reparations as the East, and the Soviet Union didn’t have nearly as much money to spend on the GDR as the USA did to spend on the West, and even despite faster economic growth, The GDR was never able to catch up with the West in this regard. All of this, on top of the fact that West Germany was also providing massive incentives to eastern Germans if they left (like above-average income, preferential housing, enormous guaranteed loans, among others I’ve described previously.) This alone not only caused mass migration from the East to the West, but was also an act of sabotage on the East German economy [37]. By doing this, the West German puppets as well as the USA were able to claim that capitalism was a far superior system to socialism and cited Germany as a clear cut example [38]. This propaganda of an inferior socialist system and superior capitalist system allowed for enough East Germans to be convinced to vote in March 1990 for an end to their system. The ruling conservative parties in West Germany also used a combination of promises and threats to ensure electoral success. For instance, 10% annual real economic growth in the first two years after unification was forecast if the conservatives won [39]. In addition, because the permission of the conservative ruling parties in the West German parliament was needed for any unification agreement or aid [40], they had a great deal of leverage to offer rewards (like a 1:1 exchange rate) for a vote favorable to capitalism and “free trade” [41]. A final factor influencing the March 1990 election results was a very destructive West German currency strategy. In return for limited economic aid, the West German government persuaded the East German government to change the official exchange rate from 1:1 to 3 East German Marks for 1 West German Mark in January 1 990 and to eliminate strict import and export controls. This action effectively reduced East German wealth and income by 2/3 [42] and totally demoralized the East German population, many studies illustrate [43]. Then, in the week before the March election, the ruling West German party promised a return to the 1: 1 exchange rate, if it was elected [44]. Many left-wing East Germans indicated that they voted for the right-wing political parties merely so that the money would come [45]. Also, the importance of expensive marketing in defeating socialism in the GDR should not be underestimated. Through effective advertising, distribution, sales manipulation, and economic clout [46], and through gross exaggeration of any quality problems for communist products [47], a superior “Western” image was created [48]. As a result, despite the fact that East German products were frequently demonstrated to be superior in unbiased scientific analysis (like taste tests without brand names), more expensive West German products were preferred [49]. Also contributing to the rapid increase in West Germany’s market share of the East German market shortly after it was opened up in 1990 was the normal practice of capitalist penetration pricing [50], whereby West German exports to East Germany were priced low enough to bankrupt East German competition (Der Spiegel, 1993). Once the East German firms (which, in addition to suffering image problems, also had inadequate liquidity, experience, and preparation for the capitalist competition) were bankrupted, prices were raised to West German levels (in order to maximize West German corporate revenues and profits). Some evidence of this phenomenon can be found in the fact that prices rose less rapidly in eastern Germany than in western Germany in 1 990, whereas inflation in eastern Germany was over 13% in 1991 compared to just 4% in western Germany after the widespread bankruptcy of East German firms, which was reflected in the 40% decline in economic output in eastern Germany in 1990 and 1991 [10]. So as you can hopefully see clearly at this point, the fall of the GDR was because of unfair socioeconomic conditions, as well as western sabotage.

This will conclude my essay on East Germany. I realize that there are a number of things I did not touch on such as whether or not the GDR was Marxist-Leninist, however I just wanted to write this essay as a general refutation to arguments I hear against East Germany made by people who have no idea what they’re talking about. For further reading on the topic of Eastern European socialism check out this great book by Austin Murphy. Thanks for reading!